EXPERT: Why New Minimum Wage Isn’t Feasible Now

ABUJA: On Thursday, September 27, 2018, the Nigeria Labour Congress and other labour unions embarked on a nationwide warning strike to protest the non-implementation of a New Minimum Wage, after the 14-day ultimatum to the Federal Government expired. However, the strike was suspended on Sunday, September 30, 2018. Consequently, the Tripartite Committee on National Minimum Wage reconvened on Thursday, October 4, 2018, and concluded its assignment on Monday, October 8, 2018. As expected, there are discrepancies among the federal, state governments and labour on the agreed amount to be paid.

Recall that after much pressure and strike threats by organised labour, President Muhammadu Buhari on Monday, November 27, 2017, inaugurated a 30-member tripartite National Minimum Wage Committee, headed by former Head of Service and Minister of Housing, Ms. Amma Pepple.

But let’s take a trip down memory lane to the genesis of the minimum wage struggle. The Federal Government had from time to time, set up a series of commissions to determine, fix, and recommend appropriate wages to be paid to workers since the era of colonial rule. But the first official step in evolving a uniform minimum wage was by the Morgan Commission of Inquiry in 1963.

Thereafter, other commissions were set up but the most prominent among them was the Udoji’s Salaries and Wages Commission of 1973. It recommended staggered wage increases in minimum wage from an annual N312 to N620 initially and eventually to N720 in the second phase of implementation. It was later reviewed in 1981 to N125 per month, and was revised in 1991 to N250 per month. It was revised again in 2000 to N5, 500 per month (for states), while that of the Federal Government was N7, 500. The current minimum wage of N18, 000 per month was implemented in 2011, following the recommendation of the Justice Alpha Belgore’s Committee.

But in all of those minimum wage increases given the demand by organised labour of the new N56, 000 now N30, 000 per month. The question is, how sustainable will the New Minimum Wage be without a viable economy? In my opinion, it won’t be sustainable based on the stark economic realities staring us in the face! An increase in wage will only be valuable and sustainable in a viable or healthy economy, and not in our current comatose economy! But what is a viable economy?

According to Steady State Manchester, publishers of the book, ‘The Viable Economy’, a viable economy is “an economy that is resilient and dynamic, providing enough for all, while supporting social well-being; more money staying local and more democratic and local control over savings and investment…An economy that delivers (and measures) what we need rather than growth for growth’s sake…An economy that rather than increase inequality, progressively becomes more equitable. An economy founded on stewardship of human and social capital that does not waste people’s energies and talents that includes everyone.”

From the foregoing, Nigeria falls short of being a viable economy. The report by the Brookings Institute that the country is the world’s poverty capital corroborates it. It said, “According to our projections, Nigeria has already overtaken India as the country with the largest number of extreme poor in early 2018… At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute…”

This report shows that our economy is not viable! And in a non-viable economy, people (the poor or socially disadvantaged group) are not able to participate fully in economic life and have greater say over their future. This is because there’s limited circulation of money in the economy, thereby drowning many Nigerians in the ocean of poverty! In this regard, one David Bergstein, Financier/CEO, Cyrano Group, wrote: “A human body, be it alive, unhealthy or dead, has the same volume of blood. The difference lies in circulation. We are healthy when our circulation is maximised, and our body begins to fail when our circulation is inhibited. The same is true for economies… For a country, MONEY is the equivalent to the body’s blood. And if the money is not flowing properly, the nation’s economy suffers… Money is only valuable to the extent that it provides incentives for exchange, thereby generating circulation.”

Bergstein’s analogical assertion leaves no one in doubt that Nigeria is suffering from ‘economic anaemia’. This is because the economy is not delivering what we need. Rather, it’s increasing inequality –no equal opportunities for people to access public services and infrastructure. The latest report by Oxfam International confirms this fact. The report entitled, “Commitment to Reducing Inequality Index 2018 (CRI)”, ranked Nigeria 157 out of 157 countries, in terms of their commitment to reducing inequality. According to the report, each year, 100 million people are driven below the poverty line by having to pay for healthcare. Almost 70 million young people are working but still living in extreme poverty, surviving on less than $2 a day.

Consequently, most parents, for example, can no longer afford secondary school education, let alone university education. At present, the education accessibility rate is just 20.1%. And according to the Central Intelligence Agency World Fact Book, as of January 2018, the literacy level of Nigeria is 59.6%. Meaning 40.4% of Nigerians are illiterates. What do you expect when 10.5 million children are out of school, which is the highest in the world!

So, how can the New Minimum Wage be sustained in a ‘sick’ economy? Granted, the New Minimum Wage may ‘swell’ the pockets of workers, but it’d be valueless on the streets of the present economy! This is because of the short supply of ‘blood’ (money) to the ‘circulatory system’ of the economy. Nigerians would continue to suffer sustained economic hardship so long as we’ve an incompetent and clueless government in place. The Hong Kong and Shanghai Banking Corporation (HSBC) report summed it all when it stated that allowing the present administration to continue in 2019 “raises the risk of limited economic progress and further fiscal deterioration…”Why? Because money is continually withdrawn and not generated back into the system!

Bergstein was apt when he said, “…Money should be generated back into the system to expand the stock markets and other outlets. With this failing to take place, a double negative results: not only is the money pulled from the system, but also it SHOCKS the system, SLOWS it down, and forces it to WORK HARDER in order to compensate.” Of course, that’s why we’re suffering from chronic economic stress!

So, for the New Minimum Wage to be sustainable, organised labour should impress on the Federal Government to build a viable economy. And to achieve this, Nigeria is in dire need of a ‘Donald Trump’! We need a President who’ll not only provide visionary leadership, but also has an entrepreneurial mindset. We need a President who knows, understands and can easily implement what Richard Olver, Chairman of BAE Systems Plc., termed the (five) characteristics most successful national economies share: Excellent Education Systems, High Levels of Investment in Research and Development, Strong links between Industry and Educational Institutions, Determination to Increase Exports, and an Ability to Translate Research into Products and Services that Sell.